India: Portside Indonesian prices unchanged amid weak end-user demand

India’s portside Indonesian coal prices remained unchanged for the second-straight week despite a rise in imported prices, as coal-consuming units kept to the sidelines and avoided making any major bookings.

Prices for 4200 GAR are assessed at INR 8,000/tonne (t) ex-Kandla, while those of 5000 GAR are at INR 11,000/t amid low demand from buyers and arrival of new vessels in the coming weeks. Prices exclude cess and GST. New arrival for 4200 GAR were also being sold at INR 8,400/t ex-Kandla, sources said.

Weak sales volume this year amid the Covid-19 pandemic and slower pace of growth in the manufacturing sector continued to weigh on the profitability of a wide range of Indian coal consuming units ranging from steel, paper, ceramics, etc.

“Our daily coal dispatches have reduced by 50% currently, as several industries work at a minimum capacity. We expect a pick-up in demand from December onwards,” a Surat based trader said.

Also, amid the volatile imported coal market where prices are fluctuating in every few days, Indian buyers have adopted a wait and watch mode, delaying their portside bookings.

“We have coal stock that would last for a month and also unlike previous months of September and October, domestic coal supplies have increased now, supporting us in holding our imported coal purchases,” said an end-user based in Nagpur.

Coal India and its subsidiaries have put on sale a total of 18.4 million tonnes (mn t) of coal under different auction schemes between 1-24 Nov’21, which has already exceeded the combined volume offered in the past two months.

Furthermore, a total of 1.36 mn t of Indonesian coal shipments are set to arrive at Indian ports by 14 Dec’21, CoalMint’s vessel line-up data (as on 24 Nov’21) reveals. 

Winter demand gains traction in Indonesia

The Indonesian Coal Index (ICI), rebounded after a four-week decline as inquiries picked up amid a strong winter demand and prevailing tight supply conditions in Indonesia.

Inquiries from Chinese traders picked up sharply last week amid expectations of tight supply in the ongoing cold snap in the country. The severe cold spell is seen affecting the national logistics as most part of northern China, the largest coal-producing region, may receive heavy snowfall.

Several state-owned utilities in the country issued tenders for December delivery amid concerns over inventory drying down quickly. However, bearish sentiment also emerged in the Chinese market after reports of NDRC mulling a coal pricing mechanism to avoid unreasonable price rally surfaced on 27 November.

Outlook

CoalMint believes, portside prices of Indonesian coal are likely to remain in a tight range amid the weak demand sentiment.

Imported Indonesian coal prices are also likely to remain range-bound amid the ongoing developments in China wherein NDRC is likely to propose a reasonable range for coal prices at mines and northern transfer ports.